Question
1. (10) Let a nominal (quoted) interest rate be: I NOM =6%. a. Find I PER for M=2, 4, 12, and 365 (semiannually, quarterly, monthly,
1. (10) Let a nominal (quoted) interest rate be: INOM=6%.
a. Find IPER for M=2, 4, 12, and 365 (semiannually, quarterly, monthly, and daily periodical interest rates, respectively).
b. Find the effective (equivalent) annual rate (EFF%/EAR) for semiannually, quarterly, monthly, and daily compounded rates. Assume INOM=6%.
EARANNUAL
EARSEMIANNUALLY
EARQUARTERLLY
EARMONTHLY
EARDAILLY
2. (5) The following questions are based on slide #32. This is an example of lump sum (e.g., Slide #3). Why?
What is the FC of $100 after 3 years under 6% (INOM=6%) monthly compounding?
a. Find the FV using a formula (refer to #32). Show formula used.
b. Find the FV using a financial calculator. Hint: First find EAR. Write down the inputs.
3. (5) The following questions are based on ordinary annuity (see Slides # 34 37).
a. Find the FV of a 3-year $100 ordinary annuity when the quoted interest rate is 4% (INOM=4%) compounded monthly.
b. Find the PV of this 3-year annuity$100 ordinary annuity when the quoted interest rate is 4% compounded monthly.
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Enhancing Financial Inclusion Through Islamic Finance Volume II
Authors: Abdelrahman Elzahi Saaid Ali , Khalifa Mohamed Ali , Mohamed Hassan Azrag
1st Edition
3030399389,3030399397
